The BBC's Alison Holt: "Playgroups are often run on a shoestring"

The Pre-School Learning Alliance claims that 1,500 have closed in the past year, in spite of the government's commitment to increasing the number of available nursery places.

Although ministers dispute these figures, they have also agreed to a second round of grants for the pre-school sector. Worth a total of �500,000, they are designed to prevent further closures.

Financial incentives given to primary schools to open classes for three and four-year-olds has meant that primary schools have grown at the expense of playgroups and nurseries.

Primary schools have opened classes for three and four-year-olds

Playgroups in the voluntary and private sector have complained that it is difficult for them to compete with the funding, staffing and free places on offer from primary schools.

There have also been claims that parents prefer to send their children to nursery classes in over-subscribed primary schools, as this is likely to help their chances of getting a place when they reach school age.

Education Minister Margret Hodge said: "I am concerned to hear about the number of playgroups which are said to be closing.

Education Minister Margaret Hodge: "I want parents to have real choice"

"I have asked for a review of how pre-schools and playgroups can play their part delivering early education and childcare as we expand both."

The Chief Executive of the Pre-School Learning Alliance, Margaret Lochrie, welcomed the review and extra funding.

"This year's grant scheme will help prevent closures," she said.

"More importantly, by carrying out this review we can try to ensure that the closures stop once and for all".